An investment property is a real estate asset that you purchase with the intent of making back more money than you initially invested. The goal of an investment property is to generate either rental income or capital gains through selling it later on. For example, if you buy a 4-unit apartment building for $400,000 and rent out each unit for $1,000 per month, that would provide a monthly rental income of $4,000 which means your net monthly cash flow (or actual cash in your pocket) would be $3,000 net positive per month after paying all expenses associated with owning the property including mortgage payments. After doing some simple math, based on this example, if you keep the property for ten years and let the value appreciate by 3% each year, you would end up with a property worth $545,000 at the end of 10 years. If you sold it for that price, your total profit would be $169,000, not accounting for inflation or other costs incurred throughout your ownership.
Why Invest In Real Estate?
Most people buy investment properties to make money either through rental income or appreciation in house prices. For example, if you have an empty home/condo sitting around collecting dust and are paying monthly bills to maintain it just because you live there now but plan on moving into another place sometime soon, why not rent out that empty home to someone who could pay the mortgage until you move out, freeing up cash flow to be used for other things? If you had a property that cost $100,000 and you live there while it appreciates during your ownership until it is worth $150,000 now but now want to sell it because now you need cash to buy another property elsewhere (new home or whatever), why not sell it for $150,000 instead of putting more money into the market where you could lose money based off the volatility of the stock market? This is called leverage.
How to Find Investment Properties?
There are many ways to find investment properties. The most common way is by looking for a deal offline through a realtor where you could drive around and see “For Sale” signs on houses or condos that pique your interest. You can then contact the seller directly if they have not listed it with an agent and maybe try to negotiate a deal by saying something like, “I’ll give you $75,000 cash for this house right now without any contingencies”, which would be called a no-contingency offer because there are no conditions in the sale such as needing to get bank approval or needing to arrange for title insurance before closing the sale. This means if the owner accepts this offer, you will walk away with a property worth $80,000 at the end of the day with no conditions for closing. Another way to identify investment properties is by looking for foreclosure auctions and banks selling distressed homes and condos on the cheap after filing bankruptcy or some other reason why they cannot sell it themselves. This could be an opportunity for you to get a new condo at half its original value while it appreciates while you hold onto it before reselling it when prices go up again.
